any math wizards out there - I have a PV problem

[schirallicpa]

It's not straight forward enough for me to find an online calculator that makes sense. 

Here's the payment schedule: receives 1400 per month for 60 months.  then receives 1540 (10% incr) per month for the next 60 months.  then 1694 per month for next 60 months.  then 1863 for next 60 months.  then 2049 for final 60 months.  Total pay is 512,760.  How do I determine what its worth today?  

I can't get my head around it.  And online calculators use straight interest or constant payments.  I'll pay you if you can do this for me!

 

 

 

[Jack from Ohio]

Is this paying off a debt?  If yes, what is the beginning balance.  What is the starting date?  I can build you an interactive Excel spreadsheet that will calculate the numbers you need.  

I am not sure of your question about what it is worth?

[schirallicpa]

This money is being received as a rent and the payer is offering a pay-off.  The contract is for 25 years.  But I want to do the math to see if their proposal makes sense.  Start date was Dec 2016.  

[schirallicpa]

So if they took at payoff amount, obviously it is discounted because money in hand now will be less than money over time. That is my question.  But I can't figure the math out and my online calculator cannot consider the change in payment amount.

 

[jklcpa]

If you have Excel, use F1 for help and search for "XNPV", then click on the link there for the instructions for that function.  Scroll to the bottom of that article for an example of how to set this up.  You'll need to enter the discount rate too.

 

[Abby Normal]

16 minutes ago, jklcpa said:

need to enter the discount rate too.

Yep. You can't find PV without an assumed rate.

 

[schirallicpa]

ugh - it's been way too many years since I have done real math!

[jklcpa]

Just now, schirallicpa said:

ugh - it's been way too many years since I have done real math!

Sending you a PM.

[Abby Normal]

TValue says it's 330,308.81 using 3.5% rate. I saved this file in case you want another rate.

[Roberts]

I was just an "expert witness" in a divorce case arguing what the discount rate should be on a long term portfolio. With Excel the math isn't overly difficult but it all comes down to what you want to use as the discount rate. The attorney asked me to do that and then both sides made the leap I was making a bunch of other financial projections off that figure. That was a completely different task that nobody asked me (or paid me) to do.

 

I say the math isn't difficult - I barely passed Financial Planning in college which was basically just a set of these formulas to determine net present value, future value, discount rate and so forth. Excel makes everything easier. I'd enter all 300 payments and do a NPV for each of them and add them up.

[schirallicpa]

Thank you every one for your help.  I have so so many cobwebs from the financial class.  I am terrible!  And I know I know how to do this.   I have been doing mundane tax entry for so long, I haven't had to look at any financial math in years. 

What discount rate to use keeps coming up.  

[Abby Normal]

56 minutes ago, schirallicpa said:

I haven't had to look at any financial math in years.

This is why we have computers and software. We couldn't really do tax returns without a computer anymore.

[Max W]

The discount rate of 3.5% is way too low.  Current rates on commercial property are tunning as high as 8.75% and with rising interest rates, I would think the minimum DR would be at least 10%.

Remember the 70's when rates were 20%+.

Abby's chart includes the payments from 2018 and those already paid should not be included the calculation.